Most investment professionals would describe the current state of the market as nothing that would knock your socks off. The S&P 500 is up about 5% YTD as we near the end of the 3rd quarter. Not bad considering volatility, for much of the summer, was at near-historic lows—in fact it was catatonic! But in the next three months we have the catalysts in place for more significant moves either up or down. Oil prices remain depressed; interest rates are at generational lows domestically, and are still at negative levels in some countries; and gold is still relatively strong. But the elections will weigh heavily… and we’re not just talking the presidential election. Control of the senate is every bit as important, as we discussed several weeks ago, and could lead to either years of gridlock or finally tackling the nation’s financial issues (monstrous debt levels, social security and the deficit).
True, the sector (as measured by the S&P 500 health care sector index) is only up .11 percent this year. (It should be noted that healthcare is the leading sector over the past 5 years—more than doubling—in that time frame.) However, while the benchmark S&P 500 has showed ho-hum gains, most of our personal portfolio holdings have far outperformed the market (see figure 1 below).
Figure 1—Performance of Individual Holdings Held since beginning of year.
|In Sickness and Wealth Holding||YTD Performance (as of Sept 16th Close)|
|Johnson & Johnson||+15.12%|
|Laboratory Corp of America||+9.50%|
|S&P 500 Index||+5.05%|
|Service Corporation International||+2.55%|
Seven of our holdings beat the broad market (many of them trounced the market by a long shot), one underperformed (Service Corp. International), and two had losses.
It seems as if Express Scripts just can’t do anything right these days. We will continue to hold this issue, but our patience is being tested. They are in danger of losing their largest customer (I still believe this will be settled out of court), and some analysts are questioning if PBMs are really providing enough cost savings. Illumina was a stock with a very high P.E. ratio that disappointed for a couple of quarters and they were mercilessly punished for this. We believe this holding will also prove worthy. Stay Tuned.